Eliminating Billions in Payment Errors

As part of the President’s Campaign to Cut Waste, this Administration has taken an aggressive approach to attacking waste, fraud, and abuse within government agencies.  Nowhere is this more apparent than in combatting improper payments – those Federal payments that are made in the wrong amount, to the wrong entity, or for the wrong purpose.

When the President took office, the rate of wasteful government-wide improper payments was on the rise.  Since then, the President has taken forceful steps to cut down on improper payments, such as issuing an Executive Order putting in place new measures to increase transparency and hold agency officials accountable to the American public, directing agencies to intensify and expand efforts to recover improper payments, establishing a “Do Not Pay” list for agencies to check before making payments, and signing into law the landmark Improper Payments Elimination and Recovery Act.  And the Administration has moved quickly to deploy cutting-edge forensic technologies to crack down on such waste for the first time in government.

These efforts have resulted in the elimination of billions of dollars in wasteful improper payments.  Today, we are pleased to report that the government-wide error rate has decreased to 4.3 percent, having steadily declined from its high-water mark of 5.4 percent in Fiscal Year (FY) 2009.  We have successfully reduced error rates in major programs all across the government—Medicare Fee-for-Service, Medicaid, Unemployment Insurance (UI), the Earned Income Tax Credit, SNAP (Food Stamps), Pell Grants, the School Lunch program, and Retirement, Survivors, and Disability Insurance.

Across the board, Federal agencies are taking targeted steps to combat erroneous payments.  As just one example, the Department of Labor is actively working with states to reduce UI improper payments. All states have been called to action to ensure that UI integrity is a top priority and to develop state-specific strategies to bring down the overpayment rate.  DOL also recently launched a partnership with the New York Department of Labor to establish a UI Integrity Center of Excellence.  This new Center will drive collaborative work with the Labor Department and other states to develop and implement innovative strategies that can be used to combat improper payments and build capacity nationally to use data analytics and predictive modeling more effectively. 

In total, the government has so far avoided over $47 billion in improper payments over the past three years, almost hitting the President’s ambitious goal of avoiding $50 billion in improper payments by the end of FY 2012.  The Administration also surpassed, by more than double, the President’s goal of recapturing for America’s taxpayers $2 billion in overpayments to contractors by the end of FY 2012.  We are announcing today that Federal agencies recaptured a record $4.4 billion in overpayments to contractors over the last three years, due in large part to the success of the Medicare Fee-for-Service Recovery Audit Contractor program.

Notably, when Department of Defense commercial payments are factored in, the total for improper payments avoided over the three years jumps to nearly $70 billion, and the government-wide error rate falls to 3.7 percent.  While including these new amounts can make year-to-year comparisons more complex, it is a more comprehensive snapshot of today’s government-wide error rate. 

These are promising results, to be sure, but we will not rest as long as there is a single dollar of improper payment.  Every dollar paid in error represents an unacceptable waste of taxpayer resources.  This Administration is committed to keeping up the fight to reduce waste, fraud, and abuse and continuing to attack this challenge with every tool at our disposal.

Danny Werfel is Controller of the Office of Management and Budget